As seen in The Deal’s “The Reimbursement Lament”
The Deal reports on the financial troubles currently faced by numerous companies in the healthcare industry. Many recent bankruptcies cite cuts to government reimbursements, such as Medicare, as an explanation for healthcare providers’ recent financial problems. However, there are other issues to consider, such as inefficient management and labor costs, as to why so many healthcare companies are beginning the restructuring process.
According to Kaye Scholer Bankruptcy & Restructuring Partner Benjamin Mintz, "It's a matter of financial efficiency.” He continues, "Obviously everyone would like to have a hospital as close to them as possible, like everyone wants a fire station as close as possible, but there's a matter of measuring costs against efficiency."
Mintz has observed difficulties in the healthcare industry over the past decade and notes, "There's definitely an industry view that the industry is in a troubled state and in a transitional period. One of the results of that is consolidation. Another comment that's out there at the government level is that maybe there are too many hospitals. I think the political view is that there may need to be a reduction of hospital services because of shifting patient needs and services."
Despite the changing state of the industry, Mintz points out that not all providers will necessarily suffer. "There may be some hospitals that benefit from certain adjustments and some that are hurt," he says. "The thing with hospitals and healthcare providers is that it's a very complex business and that there's a large number of variables, one piece of which is reimbursement." However, he says that smaller companies will likely suffer the most as they have fewer resources at their disposal, adding "Competitive factors are a big issue in particular for standalone and community-based hospitals that find it difficult to compete with larger affiliated hospitals that can negotiate better deals with third-party insurance providers.”
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